MNI China Daily Summary: Monday, December 8

TOP NEWS: China will continue to implement a more proactive fiscal policy and moderately loose monetary policy, increase counter- and cross-cyclical adjustments, and improve the efficiency of macroeconomic governance, Xinhua News Agency reported following a Politburo meeting in Beijing.

DATA: Exports in November rose 5.9% y/y to USD330.4 billion, quickly rebounding from the previous 1.1% drop and beating expectations of a 4.0% increase, data released by China Customs showed. Imports gained 1.9% y/y, quicker from 1.0% in October and behind the 2.9% market consensus.

POLICY: China imported 50.8 million metric tonnes of crude oil in November, up from 48.3 mmt in October, as total inbound shipments rose 3.2% y/y during the first 11 months, data from the Customs showed.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY122.3 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net injection of CNY14.7 billion after offsetting maturities of CNY107.6 billion today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 1.4459% from 1.4380%, Wind Information showed. The overnight repo average increased to 1.3022% from 1.3003%. 

YUAN: The currency weakened to 7.0713 against the dollar from the previous 7.0706. The PBOC set the dollar-yuan central parity rate higher at 7.0764, compared with 7.0749 set on Friday. The fixing was estimated at 7.0739 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 1.8370%, up from the previous close of 1.8300%, according to Wind Information. 

STOCKS: The Shanghai Composite Index edged up 0.54% to 3,924.08, while the CSI300 index increased 0.81% to 4,621.75. The Hang Seng Index lost 1.23% to 25,765.36. 

FROM THE PRESS: Yicai's latest Chief Economist Survey showed a December reading of 50.0—equal to the boom-bust threshold and slightly below November’s 50.3. Economists calculated November’s year-on-year CPI growth at 0.72% and PPI growth at –2.05%. They projected a –2.1% cumulative growth rate for fixed-asset investment, 3.09% year-on-year growth in total retail sales of consumer goods and 5.0% growth in industrial value-added. According to Cai Wei of KPMG, the economy remained in a phase of modest recovery supported by growth-stabilising policies and reduced external uncertainty.

China’s economic growth challenge has shifted from supply constraints to demand constraints, according to Liu Shijin, former deputy director at the Development Research Center of the State Council. Speaking at the Southern Finance Forum, Liu said that insufficient demand stems from inadequate consumption, not from weak investment or exports. As a result, economic growth will increasingly depend on innovation and consumption. China needs to construct a bridge between manufacturing and consumption to become a powerhouse in both domains. Liu added that a strong currency was an important marker of a strong financial nation. The British pound and the U.S. dollar improved their international standing through strong economic, trade, technological and military foundations, along with sound monetary institutions and developed financial systems, Liu said. In their initial stages, these countries both possessed manufacturing-centered real economies that accounted for a substantial share of global output.

China’s largest exporting province, Guangdong, is shifting from competing on cost advantages to quality, design and brand strength, according to the 21st Century Business Herald. The focus of competition is moving beyond functional specifications toward cultural aesthetics and brand value. Official data showed that during the 14th Five-Year Plan period, Guangdong’s self-brand products accounted for 21.1% of the province’s exports, an increase of 2.6 percentage points from 2020. Wang Haizhong, a professor at Sun Yat-sen University, noted that firms like BYD have established brand showrooms overseas, building sales networks and gradually strengthening their international reputation. An industry insider cautioned that enterprises should avoid exporting low-quality, low-priced products, stressing that such practices amount to “involution” and would damage the reputation of all Chinese brands.